lec02-eco101-11

lec02-eco101-11 - InternationalTrade Lecture2 c ⃝...

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Unformatted text preview: InternationalTrade Lecture2 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego September27,2011 2.ComparativeAdvantageduetoProductivityDifferences Econ101, c ⃝ M.Muendler TradeTheory • Whydocountriestrade?Shouldtheytrade? 1.Gainsfromspecialization (differencesintechnologyorresourceendowments) 2.Gainsfromeconomiesofscale(differencesinmarketsize) • Classictradetheoryexplainstradeunderthefirstperspective. The RicardianModel ,the SpecificFactorsModel ,the Heckscher- OhlinModel ,the StandardTradeModel 2.ComparativeAdvantageduetoProductivityDifferences Econ101, c ⃝ M.Muendler ComparativeAdvantageintheRicardianModel • Themaininsightstobegained – Ifeachcountryexportsthegoodsinwhichithasacomparative advantage,thenallcountriescangainfromtrade – Comparativeadvantage,butnotabsoluteadvantage,determines whethertradeisbeneficial – Opportunitycostsmeasurecomparativeadvantage • Identifytheopportunitycosts,andpredictthepatternoftrade 2.ComparativeAdvantageduetoProductivityDifferences Econ101, c ⃝ M.Muendler TheRicardianModel:AOne-FactorEconomy • Basicingredients(assumptions) – Numberoffactorsofproduction:1(labor) – Mobilityoffactorsofproduction:Acrossindustries (withinacountry,notacrosscountries) – Numberofindustries(goods):2(cheeseandwine) – Perfectcompetition,transportcosts:0 – Keyforce :Differencesintechnology (summarizedinunitlaborrequirements) 2.ComparativeAdvantageduetoProductivityDifferences Econ101, c ⃝ M.Muendler UnitLaborRequirements • Laborproductivityismodelledthroughunitlaborrequirements – Unitlaborrequirement:Numberofhoursoflaborneededforone unitofoutput 1.Wine: a LW =3 ,3hoursoflaborneededforonegallon 2.Cheese: a LC =1 ,1houroflaborneededforonepound • Theeconomy’stotalresources: L – L =120 :theeconomyhas120workers(orworkerhours) 2.ComparativeAdvantageduetoProductivityDifferences Econ101, c ⃝ M.Muendler ProductionPossibilities • TheProductionPossibilityFrontier(PPF)...
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lec02-eco101-11 - InternationalTrade Lecture2 c ⃝...

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